A Blurring Of The Lines?
Is “innovator” or “generic” becoming harder to discern?
MARCH 2008
Mike Chace-Ortiz, Director, Product Strategy, TS API Intelligence
Source: THOMSON REUTERS RESEARCH © THOMSON REUTERS
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The word on the street
• The distinction between innovators and generics is
narrowing
• Innovators, hungry for profits and struggling against
poor pipelines are fighting fire with fire and plunging
into generics
• Generics, fighting a hypercompetitive, low margin
business and too few patent expiries are being
forced to redeploy talented scientific resources into
novel R&D
Fact or myth? Following the money…
• To what extent are generics investing in innovative
R&D?
• Are brand companies investing in generics?
• What brand revenue do generic companies raise?
• What generic revenues to innovators raise?
• What is the state of novel pipelines at generic
companies?
• How does R&D spend compare between innovators
and generics?
Where is the generic industry’s money being
invested?
Just three short years ago…
2005
Focus
HQ
Teva/IVAX
Sales $M
5500
Global
Israel
Sandoz/Hexal
4600
Global
Austria
Watson/Andrx
2550
US
US
Hospira
2500
Global
US
Merck KGaA
2200
Global
Germany
ratiopharm
2000
EU
Germany
Actavis/Pliva
1550
Global
Iceland
Perrigo/Agis
1400
US
US
Mylan
1350
US
US
STADA
1200
EU+US
Germany
Ranbaxy
1150
Global
India
Barr
1050
US
US
Apotex
1000
Global
Canada
Endo
650
US
US
Gedeon Richter
600
EMEA
Hungary
Krka
600
EMEA
Slovenia
URL Mutual
500
US
US
Zentiva
475
EMEA
Czech
Pending
Pending
Source: Thomson Reuters Research
©THOMSON REUTERS
Approximately $40bn later…Cumulative
2008
M&A Spend
Teva
Sales $M
8831
Sandoz
5923
8700
Mylan
3810
7340
Hospira
2690
2100
ratiopharm
2245
?
Sigma
2090
?
Zentiva
1994
675
Watson
1980
1900
Barr
1832
2300
STADA
1830
1156
Actavis
1667
1310
Perrigo
1490
818
Dr Reddy’s
1375
580
Ranbaxy
1360
420
Gedeon Richter
1359
1300
Covidien
1300
?
Apotex
1000
?
Krka
960
?
7500
Source: Thomson Reuters Research
©THOMSON REUTERS
M&A among generics has spread quickly to
lower tiers
Acquirer
Spend
Target
Sun (India)
$450M
Taro (proposed)
Ache (Brazil)
$200M*
Biosintetica
Wockhardt (India)
$450M
Morton Grove, Pinewood, Negma
Genepharm (Greece)
$65M
Douglas
Jubilant (India)
$20M
PSI
Nicholas Piramal (India)
$18M
Avecia Custom Synthesis Unit
Orchid (India)
$4M
Bexel US
Alembic (India)
$37M
Dabur’s non-oncology portfolio
Biocon (India)
$43M
AxiCorp GmbH (70% stake)
Source: Thomson Reuters Research
©THOMSON REUTERS
* Estimated figure
The impact of global generic consolidation:
Australia
2005 Generic Market
US$550M
Arrow
Alphapharm
Douglas
GenRx
Hexal
Sigma
Mayne
Aspen
Source: Australian Gov’t, IMS Health
Australian generics: 2008
Arrow
Merged with Sigma
Alphapharm
Acquired by Mylan
Douglas
Acquired by Genepharm
GenRx
Acquired by Apotex
Hexal
Acquired by Novartis
Sigma
Mayne
Aspen
Acquired by Hospira
Behind the big deals: biogenerics quietly
pursued
• Teva
Acquires Cogenesys, Tianjin Hualida
• Hospira
Acquires Bresagen, alliance with STADA
• STADA
Establishes Bioceuticals
• Barr
Acquires Pliva
• Apotex
Continued investment in Cangene
• Where are Mylan, Watson and others?
Source: Thomson Reuters Research
©THOMSON REUTERS
How is the US generic branded industry
faring?
Company Brand
Sales
Key Branded Products
Teva
$1700M
COPAXONE, AZILECT
Watson
$370M
OXYTROL, ANDRODERM
Barr
$300M
SEASONIQUE, ENJUVIA
Mylan
$90M
Out-licensed nebivolol, divested branded
business
Covidien
$60M
RESTORIL, TOFRANIL
Par
$50M
MEGESTROL, span out Strativa Pharma for
R&D
Lupin
$30M
SUPRAX
Ranbaxy
$2M
RIOMET
APP
-
Source: Thomson Reuters Research
Separated from Abraxis Bioscience
©THOMSON REUTERS
Generic investment in novel R&D
60
50
40
Review
30
Phase III
20
Phase II
10
Phase I
Teva
Hospira
Watson
Barr
Dr Reddy's
Ranbaxy
Gedeon
Apotex
Par
Glenmark
NPIL
Wockhardt
Torrent
Biocon
Dabur
Lupin
Sun Pharma
Orchid
0
Source: Thomson Pharma © THOMSON REUTERS
Pre-Clinical
How much are generics spending on novel R&D?
Company
Novel R&D
Programs
R&D
Spend
Average Spend/Program
Teva
51
$500M
$9.8M
Hospira
6
$161M
$26.8M
Watson
4
$47M
$11.8M
Barr
18
$140M
$7.8M
Dr Reddy’s
8
$65M
$8.1M
Ranbaxy
6
$110M
$18.3M
Gedeon Richter
16
$65M
$4M
Apotex
7
$50M
$21.4M
Par
3
$12M
$4M
Glenmark
9
$10M
$1.1M
NPIL
13
$32M
$2.4M
Wockhardt
6
$17M
$2.8M
Torrent
7
$14M
$2M
Dabur
9
$10M
Lupin
6
$35M
$1.1M
Source: Thomson Reuters Research
©THOMSON REUTERS
$5.8M
DRL R&D Profile
Acquires US dermatology company, Trigenesis for $11M
2004
Establishes Perlecan and invests $8M to develop 4 promising candidates
Signs deal to co-develop DRF2593 (balaglitazone) for Diabetes with Rheoscience
Signs deal to co-develop DRF1042 for oncology indications with ClinTec International
Signs deal with Ceragenix for novel dermatology compound
Signs deal with Sygnis for development of AX200 biologic API
Signs deal with Argenta to co-develop COPD candidates
250 R&D scientists
R&D Spend $65M
Source: Thomson Pharma © THOMSON REUTERS
2008
Glenmark R&D Profile
Establishes Swiss subsidiary for biologics development
2004
Out-licenses melogliptin to Merck KGaA for $31M (since terminated)
Sells rights to US development of oglemilast to Forest for $14M
Sells rights to Japanese development of oglemilast to Teijin
Licenses Napo’s crofelemer for development in India for $1M
Eli Lilly acquires TRPV12 antagonist portfolio for $45M
Dyax to identify antibodies on Glenmark targets
150 R&D scientists
R&D Spend $10M
Out-license revenues $35M
Source: Thomson Pharma © THOMSON REUTERS
2008
But are pipelines of ~10 molecules sustainable?
'First toxicity dose' to
'First human dose'
'First human dose' to
'First patient dose'
'First patient dose' to
'First pivotal dose'
'First pivotal dose' to
'First submission'
'First submission' to
'First launch'
100%
90%
80%
60%
50%
40%
30%
20%
10%
19
96
-1 9
98
19
97
-1 9
99
19
98
-2 0
00
19
99
-2 0
01
20
00
-2 0
02
20
01
-2 0
03
19
96
-1 9
98
19
97
-1 9
99
19
98
-2 0
00
19
99
-2 0
01
20
00
-2 0
02
20
01
-2 0
03
19
96
-1 9
98
19
97
-1 9
99
19
98
-2 0
00
19
99
-2 0
01
20
00
-2 0
02
20
01
-2 0
03
19
96
-1 9
98
19
97
-1 9
99
19
98
-2 0
00
19
99
-2 0
01
20
00
-2 0
02
20
01
-2 0
03
20
01
-2 0
03
20
00
-2 0
02
0%
19
99
-2 0
01
Success rate
70%
Year of entry into phase
Source: CMR International © THOMSON REUTERS
Generic R&D: balanced but sustainable?
• Well-balanced portfolios
• Garnering interest (and revenues) from out-licensing
• In-licensing and applying sophisticated technologies to identify
new candidates
BUT
• Many de-risking by spinning-off R&D (DRL, Sun, Wockhardt)
• Can pipeline productivity overcome success rates?
• Are pipelines large enough?
• Is R&D spend sufficient for large-scale clinical development?
Where are innovators spending their money?
Innovators: also busy with consolidation
Company
M&A Spend
Targets
J&J
$2593M
Pfizer Consumer, Cordis, Animas,
TransForm
Pfizer
$2480M
CoVX, Coley, Biorexis, Rinat, Vicuron
GSK
$4470M
Domantis, Praecis, Pliva Res, CNS, ID
Novartis
$13170M
Chiron, Eon/Hexal, NeuTech
Zentiva (25% stake)
Sanofi-Aventis
$520M
Roche
$4260M
Ventana, BioVeris, NimbleGen, Curagen
AZ
$16390M
Medimmune, CAT, Arrow, Kudos, Atlantis
Merck & Co.
$1950M
Sirna, Novacardia, Glycofi, Abmaxis
Abbott
$3740M
Kos, Isis
Wyeth
0
-
0
-
Bayer
Source: TS Research
R&D spend continues
to mount
J&J
R&D Spend
$M
7125
Pfizer
7599
GSK
6772
Novartis
6430
Sanofi
4537
Roche
6873
AZ
4042
Merck & Co
4783
Abbott
2255
Wyeth
3109
Bayer
3032
BMS
3067
Eli Lilly
3132
Amgen
3366
BI
2293
Source: TS Research, PhRMA
© THOMSON REUTERS
Cost of launching an NCE continues to rise
Industry
(n=20)
$M
25th
percentil
e
75th
percentil
e
Average
Standard
deviation
Standar
d error
782
1235
1064
311
70
Source: CMR International © THOMSON REUTERS
US NCE Approvals 2001-2007
35
30
25
20
15
10
5
0
2001
2002
2003
2004
2005
Source: Newport Horizon Premium™ © THOMSON REUTERS
2006
2007
Too many companies, too few products
Molecules Losing Exclusivity in Germany and USA
2008-2015
50
40
30
20
10
0
2008
2009
2010
2011
US LoE
2012
2013
German LoE
Source: Newport Horizon Premium™ © THOMSON REUTERS
2014
2015
Current pipeline activity looks to continue the
trend
Source: Thomson Pharma © THOMSON REUTERS
How are Top 10 innovators invested in
generics?
Company
Sales
R&D
Generic
Sales
Strategy
J&J
$53,300M
$7152M
Patriot
$20M*
Authorized generics
Pfizer
$48,350M
$7599M
Greenstone
$850M*
Authorized generics
GSK
$42,810M
$6772M
Novartis
$37,020M
$6430M
Sandoz
$5923M
Traditional generics
Sanofi-Aventis
$35,650M
$4537M
Winthrop
$150M*
25% stake in Zentiva ($625M)
Roche
$33,550M
$6873M
AZ
$26,500M
$4042M
Merck & Co.
$22,636M
$4783M
Authorized generic deal with
Mylan
Abbott
$22,476M
$2255M
Spun out Hospira in 2005
Wyeth
$20,351M
$3109M
Launched generic PROTONIX
Exited generics in 2005
Authorized generic deals in ARVs
* Estimated figure
Source: Thomson Reuters Research
©THOMSON REUTERS
How about Top 20 innovators?
Company
Sales
R&D
Bayer
$18,216M
$3032M
BMS
$17,914M
$3067M
Eli Lilly
$15,691M
$3132M
Amgen
$14,268M
$3366M
BI
$13,284M
$2293M
Nycomed
$12,700M
$1476M
Schering-Plough
$10,594M
$2188M
Takeda
$10,285M
$1638M
Genentech
$9,248M
$1773M
P&G
$8964M
$250M
Generic
Sales
Strategy
Exited in 2002
Roxane, etc
$825M
Traditional generics
Warrick
$50M*
Authorized generics?
* Estimated figure
Source: Thomson Reuters Research
©THOMSON REUTERS
Conclusions
• Intra-industry consolidation remains the dominant
activity
• Top generics investing in biogenerics capabilities
• Little development of branded business at generics
• Top and mid-tier Indian generics investing small
amounts in novel R&D with some success
• Little interest in generics from innovators
• Many generics de-merging their novel R&D
businesses
What’s next?
• Pattern of intra-industry consolidation likely to
continue
– BRIC countries and other mid-tier markets
• Biogenerics will open a new growth avenue for
generics
– Will they drop their novel R&D?
• Is Indian novel R&D sustainable at current levels of
productivity and investment?
• China as the next lowest cost, capable R&D
location?
Thank You!
Mike Chace-Ortiz
Senior Director, Product Strategy
Thomson Scientific API Intelligence
Portland, ME USA
Email:
michael.chace-ortiz@thomson.com
Phone:
+1 207 871 9700 extension 24
http://scientific.thomson.com/generics
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